Related papers: Dynamical Trading Mechanism in Limit Order Markets
We report on a series of experiments in which we study the coevolutionary "arms-race" dynamics among groups of agents that engage in adaptive automated trading in an accurate model of contemporary financial markets. At any one time, every…
The large integration of variable energy resources is expected to shift a large part of the energy exchanges closer to real-time, where more accurate forecasts are available. In this context, the short-term electricity markets and in…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
We consider the use of pricing as a regulatory mechanism when an unknown number of autonomous agents compete for access to a shared resource (possibly limited in volume or capacity). In standard dynamic pricing control systems, an…
In this paper we present a novel approach to the determination of fat tails in financial data by studying the information contained in the limit order book. In an order-driven market buyers and sellers may submit limit orders, which are…
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price…
Control schemes for dynamical systems typically involve stabilizing unstable periodic orbits. In this paper we introduce a new paradigm of control that involves `trapping' the dynamics arbitrarily close to any desired trajectory. This is…
The modeling of the limit order book is directly related to the assumptions on the behavior of real market participants. This paper is twofold. We first present empirical findings that lay the ground for two improvements to these models.The…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
Dynamic pricing is both an opportunity and a challenge to the demand side. It is an opportunity as it better reflects the real time market conditions and hence enables an active demand side. However, demand's active participation does not…
We study optimal trade execution strategies in financial markets with discrete order flow. The agent has a finite liquidation horizon and must minimize price impact given a random number of incoming trade counterparties. Assuming that the…
In the domain of the so called Econophysics some attempts already have been made for applying the theory of Thermodynamics and Statistical Mechanics to economics and financial markets. In this paper a similar approach is made from a…
We study the optimal execution of market and limit orders with permanent and temporary price impacts as well as uncertainty in the filling of limit orders. Our continuous-time model incorporates a trade speed limiter and a trader director…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
Understanding the emergence of universal features such as the stylized facts in markets is a long-standing challenge that has drawn much attention from economists and physicists. Most existing models, such as stochastic volatility models,…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
We propose a dynamic network model where two mechanisms control the probability of a link between two nodes: (i) the existence or absence of this link in the past, and (ii) node-specific latent variables (dynamic fitnesses) describing the…